Amtrak accounting

Sorry Sam, but "I'm off to Canada" for this one.

One thing I've learned as a CPA who was in private practice for 21 years after leaving the railroad industry is that ANY allocation of indirect and fixed costs is subject to the whims of those who report the information (even though I acknowledge Sarbanes Oxley imposes some degree of accountability on management for the fairness of internal use management information) , I think that after the wave of "irregularities' that have sullied my profession since the "turn of the Century' have established that those, albeit an infintessimal minority -but regretably a minority at the zenith of such, wishing to manipulate even the 'bottom line' have the desire and means to do so.

To what extent those directing the internal cost allocations within Amtrak have, or are responding to, an "agenda', I know not, but I do know that within any cost allocation system in any industry, 'figures don't lie but liars figure".

This is why I have avoided past participation in discussions of this topic and accordingly decline to participate here.

Moderator's Note:

Mr Paris 06 had a superb post, which applies to both Amtrak accounting and the Amtrak/NARP interrelationships threads. I cannot duplicate a post with the tools of our Forum, but I can quote him verbatim, and keep the conversation moving forward here:

Paris06 wrote:NARP was recently severely criticized for taking money for Amtrak basically to produce pro-LD propaganda. Certainly you need food on a train that runs many hours but you need to question the shorter hauls where many folks bring their own stuff any way. There does not seem to be any shortage of places to buy food in our great nation.

As for accounting anyone can do a little arithmetic. The LDs are revenue weak. The revenue is flat for the last 10 years. Do two exercizes:

1- Divide route revenue by the number of passengers. We can be sure both of those numbers are correct. Find average revenue per route. You'll see that Acela exceeds all but Auto Train.

2- Take a month or the year to date (we now have figures for 11 mos.) and look a revenue per train. Start to think about how many people are needed to make the train run. With regard to the LDs thibk about all the people that are needed to service them.

Amtrak has given us many tools to look at what they do.

Moderator's Note,

Going forward now, please take note of what Mr Halstead said:

MODERATOR'S NOTE:

Let's keep this thread focused on Amtrak's financial accounting practices.

Discussion on NARP's compensated involvement in the Amtrak Customer Advisory Council, should be discussed in its own thread.

Thank you,
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Erik Halstead - Portland, Oregon

A Member of the Amtrak Moderator Team

Thanks , Mr. Perkowski. Another area of interest are the state by state facts. A couple of interesting exercizes:

Using the state fact sheet on the site, pick a train(s) and see how many passengers per day use the route. Remember that it includes both on and off so, for example if a person got on in Kansas City and off in Flagstaff that counts as two not one.

On that same site is emplyment by state. In 2005 Louisiana had 356 Amtrak employees. (1) That's a lot of folks to support two daily trains and one that runs three times a week. Dividing Amtrak's total payroll by average employees yields an average cost, including benefits, of $80,000+ per year per employee. That means just payroll in NOL represents 7.5% of total LD revenue. That's why the LD routes are so costly. The Amtrak payroll overwhelms everything else because, bv itself, it exceeds passenger revenue. It takes a lot of people to run these LD trains and they are all over the country. You can look at employment by craft and costs by location to figure out some of this. I would suggest that every conclusion cannot be ironclad but study of the monthly reports can tell the reader a great deal, especially if one has some familiarity with rail operations and costs.

Looking through the monthly reports reminds me of a big problem in the Age of Information - there is so much data that what you want to know is buried but, thanks to Mr. Gunn, there is a great deal of data for the interested reader to glean some trends. If this is matched with other observations, some conclusions can be drawn --- ones you won't get from NARP. As an example, as I always say, quoting Will Rogers, "All I know is what I read in the paper," whenever the press covers an Amtrak LD incident, the crew vs. passenger ratio is high. One incident I recall the Texas Eagle with 65 passengers and a crew of 16 ...... What's wrong with this?

So for the interested, print a monthly report - or wait for September 06 to come out because it will cover all of FY06. Just read through it a study the data. It tells you what is wrong and also what areas need attention --- if one looks carefully.

To follow up on the above, roughly Amtrak's payroll for Louisiana (basically NOL + Ticket Agent at Hammond) is about 70% of the ticket revenue for the three trains that serve the state. If you say that some of the Crescent revenue belongs to the NEC the numbers are even worse.

Paris06 wrote:To follow up on the above, roughly Amtrak's payroll for Louisiana (basically NOL + Ticket Agent at Hammond) is about 70% of the ticket revenue for the three trains that serve the state. If you say that some of the Crescent revenue belongs to the NEC the numbers are even worse.

No Crescent revenue should be credited to the NEC as it does not carry local passengers from NYP to WAS.

Now you've raised one of the gray-area nuances.

If the Cresent is hauled by electric locomtives at some point in its journey, the capital expense of these motors, plus electric power, plus "wear and tear" on the infrastructure has to be considered, as well as the crew cost that assigned to the NEC cost centers.

I believe it's generally held that modern cost accounting was developed by the American railroads after 1850. I would also point out that in the wake of the Penn Central bankruptcy in 1970, there was a scandal over the "creative accounting" that Penn Central presented to the shareholders to keep to stock price propped up. (See the Rush Loving, Jr., book The Men Who Loved Trains)

From this background, Amtrak was created. I'm not sure how Amtrak keeps its books, since I've never seen a detailed break-down of what costs are assigned where. Given this history with the railroads, and recent reports such as the one from the GAO, I don't know who to trust about Amtrak's numbers.

In cost accounting it is certainly possible to argue over allocation of certain cost items to various product lines. Having stdied accounting and worked in rail operations, I would suggest that the figures presented by Amtrak paint a pretty good picture of what is going on. The numbers match what you can see if you take a good look. A lot of railfans/rail passenger advocates challenge the numbers, say they are wrong and say that NEC gets everything.

I would answer that in the LD area:

1- Revenue is flat and not even growing to keep pace with annual inflation.
2- Ridership is flat.
3- Labor costs are high and spread all over the country.
4- Train delays create not only overtime and additional train crew cost but also station and mechanical added cost from trains not arriving when they should.
5- Funds transferred from NEC to LDs to avoid legislative loss cap.

Seems to me that LD routes have been dropped to bring us to the overall decline in ridership Mr. Paris 06 mentions. Add to the above trend the recent less than desirable schedules on the Silver Service, canceling of connections, poor utilization of the remaining cars in Viewliner fleet once sleepers were withdrawn and points #1 & #2 seem to be an comparison of unlike, at least from an accounting standpoint, conditions to results. Would you not agree?

Mr Payne,

SFAIK, Amtrak has not dropped any LD routes since the train-off of 1997. The exception to this is the extension of the Sunset to Florida since Katrina.

If you know of any LD routes Amtrak has ceased serving since Jan 21, 2001, please inform the Forum.

When was the Silver Palm cut back to SAV and turned into the Palmetto? And the Three Rivers disc? Not sure of dates.

(Tech Question: Would the Silver Palm cutback count as a disc since the Silver Meteor continues to serve the route?

Seems to me the Three Rivers route died in early March, 2005. No service -- such as it was -- to Youngstown, Akron, and Fostoria, Ohio.

We should also note that strictly speaking, this was not a "train discontinuation"; but some fancy tap-dancing with the Pennsylvanian service and scheduling. The only 180-day train-off public hearings as required by statute were held in the Ohio cities affected.

I didn't see a mention of a cutoff 1997 date to qualify the statement so I was assuming Mr. Paris06 meant for a extended period into the 1990's.

Seems to me that a real accounting measurement such as service car miles should be employed to judge the amount of service provided relative to the revenue/ ridership before such can be determined to be declining against such a macro economic measurement as inflation. In an of itself a statement that such and such is declining has no real decision making use for a manager if there is not a base. That being said I sure would like for Amtrak to report car-miles on each train route.

If you compare the revenue of the 15 LD routes running today vs. the same routes in FY97 there is a slight decrease in revenue and a small increase in riders - plus a big increase in loss.

I do not see what passenger miles or car miles has to do with anything. To measure a route you need revenue and expense, any other figures seem rather meaningless to me.